What will happen to the mining industry under high pressure?

Recent news has shown that the rectification of the mining industry must be carried out. Just the day before yesterday, the National Development and Reform Commission issued the "Implementation Plan for the National Integrated Big Data Center Collaborative Innovation System and Computing Hub", which stated that it is necessary to deploy national computing hub nodes, implement the "East Data West Computing" project, and build a new computing network pattern oriented by data flow. In this round of policies, it is not difficult to see that the country has taken a two-pronged approach to carbon neutrality and computing power layout.

Readers can get a preliminary understanding of the recent policy pace through this timeline:

• On May 14, State Grid Sichuan Aba Electric Power Co., Ltd. also issued a notice of power restriction and power outage.

• On May 19, staff from the Inner Mongolia Development and Reform Commission stated that they will continue to exercise high-pressure supervision on virtual currency mining in the future.

• On May 21, the Financial Committee clearly stated that it would crack down on Bitcoin mining and trading.

• On May 25, the Inner Mongolia Autonomous Region Development and Reform Commission issued a draft for soliciting opinions on "Eight Measures to Resolutely Crack Down on and Punish Virtual Currency Mining."

• On May 26, the National Development and Reform Commission issued the implementation plan for the computing power hub.

• On June 2, the Sichuan Supervision Office of the National Energy Administration will hold a small-scale research seminar.

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Cooperating with supervision does not necessarily mean escaping

Under the joint initiative of global environmental protection, carbon peak and carbon neutrality are always issues that need to be faced, and the restrictions and suppression this time are generally believed to be related to the country's "dual control" goals. That is, the carbon peak and carbon neutrality goals were written into the government work report for the first time at this year's National People's Congress. The so-called carbon peak means that carbon dioxide emissions will reach a peak before 2030 and will no longer increase, while carbon neutrality means that all possible means will be used before 2060 to neutralize the output of carbon dioxide and achieve carbon zero emissions. Under this policy trend, related high-emission enterprises will be affected.

The general view on the current policy crackdown on Bitcoin mining is that the country's restrictions on blockchain mining and Bitcoin transactions have had a very big impact on the industry, and the mining industry may "go overseas" under policy suppression. This analysis is mainly aimed at the premise of more diversified layouts or large mining plants. The strength and planning layout of such enterprises allow them to "go overseas." For many small and medium-sized mines, going overseas can only be a last resort. Moreover, in last year's 14th Five-Year Plan, blockchain was included in the national planning layout as a key industry of the digital economy. At present, the country is also vigorously deploying central digital currency, and many demonstrations of clean energy mining parks have been built. Therefore, the introduction of this round of policies will not have a fatal impact on the industry, but rather a wise move to "cut the Gordian knot" by introducing and unblocking the encryption ecosystem at the right time.

Why do you say that? First, digital currencies are developing rapidly. The crazy trend in recent months has overheated the entire market, or financial chaos has occurred. Then, this policy just wakes up the overheated market. Second, when the market is developing too fast and the bubble is serious, if the peripheral value of the blockchain reaches a considerable size or is difficult to control, it will be more difficult to regulate it, and the difficulty of control will also face challenges. Third, Sichuan, a major mining area, is about to enter the flood season. If the guidance, inspection and management work can be done before this, it can prepare for the "qualified" mining institutions to face the flood season, which is beneficial and harmless.

We should maintain a more objective and rational analysis of such policy issuance. In the second half of 2017, China banned Bitcoin trading and initial coin offerings (ICOs), and the price of global encrypted digital currencies plummeted. But soon thereafter, cryptocurrencies began to rebound, creating a new high in currency value, and then fell sharply again. A long time later, mainstream tokens such as Bitcoin created new market capitalizations again and again, and established a very strong market consensus. Therefore, this restriction is not a devastating blow to the industry. After re-rectification or adjustment, we can look forward to the beautiful scene of "a thousand trees blooming before a sick tree". The latest Galaxy Digital research report also pointed out that the correction of Bitcoin is beneficial to market development in the long run.

The way out is still compliance: mechanism consensus needs policy guidance

The first thing to be impacted by the issuance of restrictions on mining and crackdown on Bitcoin transactions is the mining ecosystem, which is closely related to the interests of the miners working in it. Here we can see the important position of miners through Bitcoin. It should be noted that the role of miners is different in the primary and secondary markets: in the primary market, since the rules determine the number and rhythm of issuance, the supply of Bitcoin is constant, and at this time miners are all demanders. The more miners (computing power) are mining, the stronger the demand from demanders, which directly pushes up the cost of mining, that is, the cost of obtaining first-hand Bitcoin; in the secondary market, since miners only hold first-hand Bitcoin, miners have become the most important suppliers, and users who speculate and use Bitcoin have become demanders in the secondary market, while the other type of suppliers are holders of second-hand Bitcoin.

At present, the value of one Bitcoin is hovering around 40,000 US dollars, which has more than doubled compared to the same period last year. In the nature of profit-seeking, some miners must go overseas, while some miners have temporarily stopped access to IPs in the mainland in accordance with the recent regulatory spirit of relevant departments. In essence, compliance will become the only way for the crypto world to move forward, no matter what form it takes. More than once, whenever a project is launched or an important meeting is held, industry insiders have always discussed compliance. Objectively speaking, at every blockchain conference, people's understanding of blockchain and cryptocurrency is very confusing, and their actions are extremely blind. As for what the compliance standard is, there has been no clear answer. This proposal or government call has pointed out a clear direction for the industry and provided a very good demonstration case for accelerating blockchain compliance.

As for why regulation is needed, we need to look at it from the perspective of the development of blockchain and Bitcoin. Blockchain has created a mechanism consensus that is different from traditional third-party permission. It is formed naturally. This naturally formed mechanism consensus proves its unique characteristics in terms of trust value, such as being tamper-proof and irrevocable. The whole process is free of privilege, all participants are equal, the process is fair, and there is no need for third parties to participate again. The secular consensus in the field of currency is represented by legal tender, and the first innovative application of mechanism consensus is cryptocurrency. However, whether this innovation will be finally verified as successful, especially whether the specific innovations seen so far can be confirmed and recognized, still faces great challenges. That is, what we can see now is that it is accepted by users, especially how many users can adopt and use it, and then it re-enters the category of "secular", because if the mechanism consensus wants to be widely accepted and adopted, it still needs to pass the threshold of "secular". If cryptocurrency wants to evolve logically into a generally recognized method, it needs the role of regulation.

As the first innovative application, Bitcoin was once called digital gold and has a super-scale secular worship. With the emergence of various altcoins, meme coins, and derivative coins, according to the normal law of development, the cryptocurrency industry will undergo its own evolution and iteration, and then form a more universal value target, continuously improve its application practicality, and replace the early blind worship with ecological value. Bitcoin has shown a certain vitality and demand, but it still needs to go through the test of the market. Its development potential cannot be underestimated, but how it evolves is crucial.

The next potential area of ​​mining

The external impact after the issuance of the restriction order is first reflected in the decline in computing power, including Ant Pool, F2poo, Poolin, etc., which have declined to varying degrees. The more macro-impact is the gold rush and reshuffle in the industry. New mining machine service providers or mining-related sectors will be forced to revolutionize themselves under pressure. Many industrial layouters have a better chance of winning in this round of reshuffle.

(Data source: BTC.COM)

(Data source: QKL123)

Another is whether Bitcoin, as a value storage layer, can play another level of value with the help of nodes. For example, other sectors of the crypto ecosystem, such as Filecoin, can follow the trend and leverage the mining nodes of Bitcoin and Ethereum to form an industrial pattern of mutual empowerment. Is it possible to further interoperate on the underlying architecture to achieve "exponential" growth in value storage and computing power storage? At present, it may still be in a very early stage, but it is very likely to form such a pattern in the future. In the "Implementation Plan for the National Integrated Big Data Center Collaborative Innovation System and Computing Power Hub" issued by the National Development and Reform Commission, an important footnote is to build a new computing power network pattern. Bitcoin and other mining nodes are very likely to become the pioneers in the construction of this batch of computing power patterns.

In short, whether it is domestic or foreign miners, migration between regions cannot solve the fundamental problem. The essence is to find the final solution, whether it is starting from policy or leveraging advantages to give play to the underlying value and better extend the original intention and mission of blockchain technology.